GOP tax cut plan would add $1.7 trillion to the deficit, CBO projects

Key Points
  • The amended House Republican tax plan will increase budget deficits by $1.7 trillion over 10 years, according to the CBO.
  • It will also cause U.S. debt to rise more than current projections, the CBO said.
  • The House is looking for other ways to raise revenue to offset tax cuts.
CBO says House GOP’s tax bill adds $1.7 trillion to the deficit over the next decade

The House Republican tax plan may have a deficit problem.

The GOP bill including some changes would increase federal budget deficits by $1.7 trillion over 10 years, according to an estimate by the nonpartisan Congressional Budget Office. That includes money for additional debt service payments due to the bill.

Under the plan, U.S. debt would rise to 97.1 percent of gross domestic product in 2027, up from 91.2 percent under current CBO projections.

CBO Director Keith Hall outlined the projections in a Wednesday letter to House Ways and Means Committee ranking member Rep. Richard Neal, D-Mass. They are partly based on calculations by the Joint Committee on Taxation.

The deficit figure does not include the estimated effects of economic growth. Republicans argue that growth sparked by the bill will help to offset, or cancel out entirely, the budget shortfall caused by broad tax cuts.

Under budget rules congressional Republicans are using to pass a tax plan, the bill can only increase deficits by $1.5 trillion over 10 years, before growth is taken into account.

The plan, called the Tax Cuts and Jobs Act, cuts the corporate tax rate from 35 percent to 20 percent, while moderately reducing household income-tax rates. It changes some popular provisions such as the mortgage interest deduction, but leaves others, like the 401(k) tax benefit, unchanged.

The House hopes to pass its bill as early as next week. The Senate plans to release its own proposal, which likely will contain differences from the House bill.

Lawmakers are looking for ways to gain revenue to help offset the tax cuts. One possible provision to save money is repealing the Affordable Care Act rule that requires Americans to have health insurance or pay a penalty.

House Republicans may be reluctant to scrap the rule because doing so could run into resistance in the Senate.

A separate report from Fitch Ratings on Tuesday estimated that the GOP tax cuts would not pay for themselves and instead would add "significantly" to U.S. debt.

White House economic advisor Gary Cohn says tax bill won't increase deficit